Inflation Expectations in a Globalized Economy
by Olivier Coibion (UT Austin) and Yuriy Gorodnichenko (UC Berkeley)
This proposal is for a new survey of firms’ expectations, both in the U.S. and internationally. This survey will accomplish two complementary objectives: i) data on firms’ expectations will enable new research into how firms form their expectations and how these expectations affect their economic decisions; ii) these data will be of immediate practical use to policymakers and practitioners alike. This project will address a central shortcoming in this area, namely the absence of quantitative evidence on firms’ macroeconomic expectations through the creation and implementation of a new quantitative survey of firms. This survey will track the macroeconomic expectations of firms over time, such as beliefs about inflation, interest rates and unemployment. The survey will also enable researchers to address a number of outstanding questions about firm expectations, such as the degree to which these expectations are anchored, how attentive firms are to macroeconomic versus microeconomic developments, the determinants of inattention at the level of the firm, the effects of macroeconomic and microeconomic uncertainty on firm pricing, employment and investment decisions, the nature of higher-order expectations, and the extent to which financial and other constraints affect firm decision-making.